The problem is in our tax system, which has specialised in harassing the people and extorting the maximum it can from their hard-earned money. The banking policies are also not without fault
Money stashed in Swiss banks is back in news. The Supreme Court of India wants the names of 26 Indians revealed. The exact money they have is not known. But income tax authorities seem to know all of them. It has demanded a tax of Rs 40 crore. If that is so the amount is really not that large. Normally, one-third of the income is claimed as tax. By that token the total money would not be more Rs 120 crore with the depositors of lGT Bank, liechtenstein, and with those whose information was provided by Germany.
But more than this, Indians needs to be wary of the high public-sector bank losses of Rs 2,29,007 crore and the Government’s move to make these losses by recapitalising to the tune of Rs 54,200 crore during the past three years. It is a scam which nobody discusses. The money touted to be in foreign banks is a fraction of the total non-performing assets.
Switzerland has once again refused to share information about the deposits there as its Ambassador to India, linus von Castelmur, says that data with India was robbed by a European country and, as per Swiss law, stolen data could not be used to obtain information. But how much money the other banks would haveIJ There are many guesses but no firm information has yet been revealed.
Some reports claim a total exceeding $1.4 trillion are stashed in Switzerland. Other reports, including those coming from Swiss Bankers Association and the Government of Switzerland, claim that these findings are false and fabricated, and the total amount held in all Swiss banks by citizens of India is about two billion dollars.
In February 2012, the Central Bureau of Investigation Director said that Indians have $500 billion of illegal funds in foreign tax havens. In March 2012, the Government clarified in Parliament that the CBI Director’s statement on $500 billion (Rs 30,000 crore) of illegal money was an estimate based on a statement made to the Supreme Court in July 2011.
In 2011, India got the names of 782 Indians who had accounts with HSBC. But the Government did not disclose the names. According to the White Paper on Black Money in India, published in May 2012, Swiss National Bank estimated that the total amount of deposits in all Swiss banks, at the end of 2010, by citizens of India were CHF 1.95 billion (Rs 9,300 crore or $2.1 billion). This amount is about 700-fold less than the alleged $1.4 trillion in some media reports.
Why is this brouhahaIJ It is being propagated that if all the money stashed abroad is repatriated, it would usher in a golden era. If the figures given by the Government are correct then it would be only 25 per cent of a year’s National Rural Employment Guarantee Act allocation. If this is what the Supreme Court is trying to probe, it would end up paying a hefty sum on investigations. It might become another Bofors where the investigating agencies spent more money than the total bribe alleged to have been paid.
It also rakes up another question: Why do people stash away their money abroadIJ It points to a problem with our taxation system which has specialised in harassment and extorting the maximum.
The state needs taxes. That is a reality. The state also needs to economise on its unnecessary expenses. It is in a vortex. Corrupt elements raise prices. It leads to higher wages in organised sector. It increases money supply. The cycle of inflation continues. The Government gets into deficit. It calls for a review on how prices could be controlled and how wage raise should be checked.
It raises a moot question: Is black money really an issueIJ By the definition of the tax authorities, virtually all cash transactions are ‘black’. They forget that trading in cash gives robust strength to the economy. In such transactions, by traders in different sectors, default is the minimum. Turnovers take place at small fees or commissions. It keeps the economy lubricated.
But the tax authorities want everything to be transacted through the banking system. In fact, the functioning of many banks is suspect. The banking system takes unethical cuts on the pretext of a cheque having ‘bounced’. They collect the money the following day but the customer is made to suffer.
This apart, the transactions in banks are possibly no more safe. The banking losses, called NPAs, as noted, are increasing. The growth rate of net NPAs at 38 per cent has been significantly higher than the 27 per cent growth rate for gross NPAs.
This needs special attention. It is a simple way to defalcate public money. The banking system is getting weaker. The Government quietly recapitalised the public-sector banks by Rs 54,200 crore in three years. In other words, people are having a double whammy. Their deposits are at risk and taxes they pay are being utilised to keep the banks afloat.
The new Government has to probe why the banks are at losses and who have benefitted. It is certainly a greater risk than the ‘unaccounted’ foreign deposits. In simple terms, more money is being swindled than the deposits banks are getting.